Question

Kishore and Ranjan were partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1stApril, 2024, their Balance Sheet was as follows :
Balance Sheet of Kishore and Ranjan as at 1stApril, 2024

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	1,80,000	Cash in hand	30,000
General Reserve	20,000	Debtors	1,20,000
Capitals:	Kishore – 6,00,000	Stock	1,50,000
	Ranjan – 4,00,000	Furniture	1,00,000
		Land and Building	8,00,000
Total	12,00,000	Total	12,00,000

On the above date, Singh was admitted as a new partner on the following terms :
(i) Singh will bring \(₹1,50,000\) as his capital and \(₹50,000\) as his share of goodwill premium.
(ii) The value of stock will be reduced by 10% and Land and Building will be appreciated by 10%.
(iii) Furniture will be revalued at \(₹90,000\).
(iv) A provision for doubtful debts will be created on sundry debtors at 5%.
(v) Investments worth \(₹10,000\) not mentioned in the Balance Sheet will be taken into account.
(vi) A creditor of \(₹1,000\) is not likely to claim his money and is to be written off.
Pass necessary journal entries for the above transactions in the books of the firm on Singh's admission.

Hint:

Journal entries on admission include: \begin{itemize} \item Bringing capital and goodwill by new partner. \item Adjustments in revaluation and reserves. \item Distribution of goodwill and revaluation profit/loss in old ratio. \end{itemize}

Answer 1

Financial Records of the Firm:

Transaction Details	Ref.	Value (₹)
Cash Account Debited    Crediting Singh's Capital Account     Crediting Premium for Goodwill Account (Recording capital and goodwill contribution by Singh)		2,00,000 1,50,000 50,000
Premium for Goodwill Account Debited     Crediting Kishore's Capital Account     Crediting Ranjan's Capital Account (Allocating goodwill premium based on sacrifice ratio 3:2)		50,000 30,000 20,000
Revaluation Account Debited     Crediting Stock Account     Crediting Furniture Account     Crediting Provision for Doubtful Debts Account     Crediting Creditors Account (Reflecting decreases in asset values and establishment of provisions)		38,000 15,000 10,000 6,000 1,000
Land and Building Account Debited Investments Account Debited     Crediting Revaluation Account (Recording increases in asset values)		80,000 10,000 90,000
Revaluation Account Debited     Crediting Kishore’s Capital Account     Crediting Ranjan’s Capital Account (Distributing profit from revaluation in ratio 3:2)		52,000 31,200 20,800
General Reserve Account Debited     Crediting Kishore’s Capital Account     Crediting Ranjan’s Capital Account (Distributing general reserve according to old profit-sharing ratio)		20,000 12,000 8,000